New amendments to Law on Investment (LOI) and Law on Enterprise (LOE) from 2021

The new amendments to Law on Investment (LOI) and Law on Enterprise (LOE) entered into force on 1 January 2021 while certain provisions has already kicked in from September 2020. There are several changes with regard to incentives and business lines. The foreigner investors should be more affected, in a positive way, by the new regulation.

With the new LOI, some conditional business sectors will open to both domestic and foreign investors. Commercial arbitration, franchising, and logistics services are no longer considered The new amendments to Law on Investment (LOI) and Law on Enterprise (LOE) entered into force on 1 January 2021 while certain provisions has already kicked in from September 2020. There are several changes with regard to incentives and business lines. The foreigner investors should be more affected, in a positive way, by the new regulation.

With the new LOI, some conditional business sectors will open to both domestic and foreign investors. Commercial arbitration, franchising, and logistics services are no longer considered conditional business lines. Furthermore, the Government will issue two lists of business sectors and lines that will be restricted and conditional for foreign investors. This means that, in every other business, foreign investors will be treated as Vietnamese.

The new LOI decreases the foreign ownership threshold from 51% to 50% to determine if an economic organization with foreign-owned capital must satisfy conditions prior to the investment. According to the amended Article 23 of the LOI stipulates that a foreign invested company incorporated in Vietnam is subject to the same conditions and investment procedures applicable to foreign investors (corporates and individuals) if more than 50% of its charter capital is held by:

a. a foreign investor or investors;

b. enterprise(s) under a. above; or

c. both foreign investor(s) and enterprise(s) under a.

This adjustment is to comply with international practices related to the spirit of the simple majority principle and will avoid the current habit where a company can be controlled by foreign investors with more than 50% but less than 51% interest, yet still be treated by the current LOI as Vietnamese investors for the purpose of their investment activities in Vietnam. Regarding public and listed companies, they will be subject to a different treatment regime, as their foreign ownership level may fluctuate frequently depending on the trading in the securities market.

Instead, the new LOE doesn’t provide substantial changes, but rather deals mostly with administrative procedures for company registration, operation, restructuring and liquidation. For instance, the requirement to register a company seal has been abolished, while electronic seals have been recognized by the law.

To ease the process and reduce the time cost, online and offline registrations shall have the same legal validity. Currently, after an online submission on the National Business Registration Portal, companies had to complete the procedure by redundantly submitting a hard copy of the application dossier. The new LOE does not require such paperwork.

Regarding the capital injection for new companies, the new LOE maintains the time limit of 90 days from the issuance of the ERC to transfer the charter capital. However some exceptions were introduced, allowing certain in-kind contributions where the time required for transportation/importation of assets or completion of changes of ownership are not counted as part of the 90-day time limit.